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Saturday, March 10, 2018

Ambrose Evans-Pritchard — Bundesbank back in charge of ECB, sending shivers through Italy

The European Central Bank has dropped its long-standing pledge to boost stimulus if conditions deteriorate, signalling the triumph of German-led hawks and marking a major turning point in the eurozone’s monetary regime.

Trump knows exactly what he is doing to China, Japan and the Eurozone. Raise those rates Jerome my boy raise those rates. Lets see how they get on when their currencies strengthen.

The EU will never accept fiscal policy and break the 3% rule to weaken the Euro. So the correct response should be stop QE and start unwinding the balance sheets and start hiking the interest rates in the EU. That would weaken the Euro just like those polcies have weakened the $.

But Drahgi can't do it because he's lied for so long about it he would look like a clown and the markets would destroy him.

When we perform QE. Let's swap an interest bearing asset for a reserve blance and call it a fiscal stimuals

When we unwind our balance sheets. Let's swap a reserve balance for an interest bearing asset and call it tightening.

Then stand back and see how many chumps fall for it.

Let's swap an interest bearing asset for a reserve balance

So we can keep our inflation low and let's introduce the growth and stability pact and have a race to the bottom with wages so EU consumers can't afford imports.

This way we can protect the Euro for our export to growth model and continue to run large trade surpluses.

But we'll lie to the markets and call QE a fiscal stimulas. Lets repeat it over and over and over and over and over and over and over and over again every 15 mins and we'll parcel it up into soundbites.

Then stand back and laugh at them.

That's why Japan and China are so different to the EU.

Japan and China are not afraid to bring out the big bazooka ( fiscal policy) to protect their currency in their export to growth model. By announcing massive public sector projects.

The way the EU is set up by the neoliberals they are hopping on one leg with their hands tied behind their back. This is what happens when you take fiscal policy completely off the table and only allow your private sectorS to save 3% of GDP.

Why not allow more than 3% of GDP. Let's say 6% of GDP to get it all going and kick start it and bring unemployment down in the EU.

There's nothing stopping them from moving it back down to 3%, 2% 1% if it starts to heat up.

"Raise those rates Jerome my boy raise those rates. Lets see how they get on when their currencies strengthen."

I think you might give Trump too much credit... we'll have to see... he has demonstrated he knows that if the trade deficit goes down the other entry will bring the fiscal deficit down but that is as far as it goes...